WASHINGTON— The Consumer Financial Protection Bureau (CFPB) has issued its annual report on debt collection, which the agency said highlights “aggressive and illegal practices in the collection of medical debt and rental debt.”
According to the Bureau, the report discusses how problems with real estate companies’ “revenue management software” can result in improperly inflated rental debt amounts.
The report also focuses on debt collectors’ attempts to collect medical bills already satisfied by non-profit hospitals’ financial assistance programs, ‘as well as the fact that many medical bills from low-income consumers do not get addressed by financial assistance in the first place,” the FDIC said.
Medical Debt Collection
“Tens of millions of people are pursued by debt collectors for purportedly unpaid medical bills every year,” the CFPB said. “Today’s report highlights consistent collections problems. Many of the problems have persisted since last year’s report. In 2023, consumer complaints about medical debt in collections made up about 11% of all collections complaints received by the CFPB.”
The Complaints
The CFPB said complaints submitted by consumers and its own research show that debt collectors:
- Attempt to collect already paid medical bills or bills eligible for financial assistance: “Medical debt collectors often attempt to collect bills that have already been satisfied by non-profit hospitals’ financial assistance programs,” the CFPB said. “Additionally, non-profit hospitals fail to properly address medical bills from low-income patients that should receive financial assistance and instead send the bills to debt collectors. Many consumers describe poor communication and information-sharing between the debt collector and the hospital, so the burden often falls on the patient to prove that they do not owe the debt.”
- Aggressively pursue patients for bills arising from medical payment products: The CFPB said it continues to receive complaints about medical financing products, which are offered to patients by some non-profit hospitals as well as other healthcare providers, “without considering whether the patients may be eligible for financial assistance. “Non-profit hospitals might partner with financial institutions to offer medical financing products because they perceive that enrolling patients in these products enables them to get compensated for bills via collections practices that would otherwise be prohibited by Internal Revenue Service regulations,” the Bureau stated. “As a result, debt collectors end up pursuing patients for these bills even when the bills should never have been incurred in the first place.”
Rental Debt Collection
In August 2023, the CFPB noted it started accepting complaints about rental debt collection. From August 2023 to the end of that year, the CFPB reported it received more than 1,700 rental debt complaints.
“In the United States, rental debt is estimated to be more than $9 billion, with over 4.5 million households behind on rent payments,” the CFPB said. “Rental debt collectors often charge renters collection fees in addition to the unpaid rent itself. As the CFPB has observed with medical debt, many debt collectors furnish rental debt to credit reporting companies as a means of collecting debt through coercion.”
The Complaints
The CFPB said the complaints submitted by consumers and its own research show that the infusion of consumer financial products and services into the rental market raises risks for renters, including improper debt collection due to:
- Illegal price-fixing: “Law enforcement officials in several states as well as individual renters have alleged that rapid increases in rent have been driven by illegal price-fixing,” the CFPB said. “Landlords and management companies may have used ‘revenue management software’ to collect improper amounts that ultimately end up in debt collection. Debt collectors collecting on bills that are inflated due to illegal price-fixing may be violating the Fair Debt Collection Practices Act.”
- Tacked on rental fees: The CFPB said it has heard from renters, as well as landlords, rental junk fees, including fees from rental payment processing servicers added onto and required as a condition for rent payment. “It is often not clear whether these fees are allowed under the lease agreement or local law, and, thus, able to be targeted by debt collectors,” the CFPB said.
CFPB Actions
In response, the CFPB is taking steps to ensure that debt collectors follow consumer financial protection laws, including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The CFPB said it has also has brought enforcement actions against debt collectors for their efforts to collect on unsubstantiated debt, unlawfully threatening legal action against consumers, and other violations.
The new CFPB report can be found here.